Saudi Aramco Acquires 20 Percent Stake In Reliance In $15 Billion Deal

Saudi Aramco-Reliance Deal
Mukesh Ambani, Chairman and Managing Director of Reliance Industries, attends the company's annual general meeting in Mumbai (Photo: Reuters / Francis Mascarenhas)

The world's largest crude oil producer is now making moves to significantly increase its oil production. Saudi Aramco is reportedly planning to buy a 20 percent stake in India's Reliance Industries, including a stake in the company's Jamnagar refinery complex capable of producing up to 1.24 million barrels a day.

Reliance Chairman Mukesh Ambani announced during the company's annual general meeting in Mumbai that Saudi Aramco has agreed to pay around $15 billion for the substantial stake.

This would essentially value Reliance's oil and chemical division at around $75 billion, including debts. As part of the deal, Reliance has agreed to a long-term purchase agreement, requiring it to buy at least 500,000 barrels of oil per day from Aramco.

 The deal is the latest in a long line of acquisitions by Saudi Aramco as part of its plans to double its processing network with the goal of producing as much as 10 million barrels of oil per day by 2030.

The goal is meant to ensure Aramco's dominance in the industry in the coming years and to keep up with growing demands from its global buyers. Aramco is reportedly still on course for its planned initial public offering, which it revealed could materialize sometime in 2020 or 2021.

According to Ambani, the partnership is a perfect match that will give the world's largest oil producer access to the world's largest refinery and petrochemicals complex. The deal itself is expected to be completed by March of next year after it has undergone all the proper due diligence and regulatory approvals.

Reliance revealed that both companies have already signed a non-binding Letter of Intent, which outlines some of the details regarding the proposed investment for Reliance's oil-to-chemical division. The division includes the firm's refining, fuels marketing, and petrochemical businesses.

The sale of part of its oil-to-chemical division shares is Reliance's latest round of sell-offs to reduce its debts and to fuel its myriad of other investments. The company has recently been selling a significant number of its assets, including its telecommunications towers and some of its oil and gas fields.

The company is scheduled to receive around $990 million from BP Plc for the purchase of a 49 percent stake in its fuel retail business. The deal will BP will form a new joint venture that will take over operations of Reliance's 1,400 retail fuel stations as well as its aviation fuel operations. As of the moment, Reliance's overall debt stands at around $32 billion. 

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